What's next for Virgin Australia internationally?

By SilverBromide | Jun 03, 2018, 07:32 AM
While VA's domestic operation ticks on apace, their international partnerships are in full retreat. EY is in a bad way, cutting service after service, while adding redemption fees. NZ and QF's feeder alliance puts significant pressure on VA's trans-tasman traffic, which is shrinking as they lose capacity feed from NZ planes which they can't replace on their own metal.

A forthcoming agreement with AC is stalled, as are agreements with HNA group airlines. Co-operation with VS remains marginal at best, and agreements for intra-european travel hinge on the dire fortunes of AZ, and their anemic network out of FCO or MXP. Even SA and HA, whose partnerships provided marginal value at best, have been scaled back. DL and SQ are steady on, but it's been years since we've seen the partnerships deepened, and the elite benefits on both airlines have been scaled back.

VA can't add routes by itself because it doesn't have the planes, and it also has no forthcoming widebody orders on the book. In short, the virtual alliance is in tatters, and international operations can't stand on their own.

So what's next? What do you expect VA will do to try and improve the situation internationally? Can VA expand back into the black? Will they still rely on new, or deepening partnerships? What will a salvaged virtual alliance look like?
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By doctorjosh | Jun 03, 2018, 09:45 AM
Simple answer: join a global alliance, most likely SkyTeam (but that would depend on SQ, EY and HNA's support for that), as StarAlliance will not welcome them (thanks to UA and now NZ) and OneWorld is out of the question.
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By cavemanzk | Jun 03, 2018, 11:23 AM
Whats next for VA? most likely dropping all there Tasman routes within the next 12months, there is now way they can get any business traffic, and with the latest agreement with NZ/QF what was left of that market for them is now gone.

Best option would be to put TT on the Tasman and fight for the low end passengers with JQ.
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By DanV | Jun 03, 2018, 11:32 AM
VA still have codeshare/JV obligations with HU, HX and DL on the Tasman. Can't see VA dropping Trans-Tasman entirely, most likely will be keeping the bare minimum for their codeshare partners, while replacing the remainder with TT.
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By GBRGB | Jun 03, 2018, 12:29 PM
They should just go in heavy to Singapore as a conduit to and from Aust for Singapore airlines, they need partners and seem short of other options. They could probably look at adding some regional centres to Singapore as well and maybe the same strategy to NZ also, TSV, MCY, NEW are possibilities where lounge access is less of an imperative, they need to find their own niche in the market somehow, they are getting flogged on the day to day stuff.
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By aussiflyer | Jun 03, 2018, 12:57 PM
Bring back Virgin Blue and differentiate from the crowd!
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By JBL | Jun 03, 2018, 03:00 PM
Hard to predict, there are a number of factors.

Firstly with the NZ/QF agreement, I don't necessarily think it will last long. While the agreement does not require approval to be established, the ACCC has review powers and may possibly determine it anti-competitive behaviour. While it does not cover trans-tasman, particularly in New Zealand the agreement will provide a lot more feeder traffic than before. This will mean sales to fill seats will be less necessary and prices on domestic routes will rise, same with Australia to a lesser extent.

However, if the agreement is not struck down, I can see it going deepening. In which case, Jetstar NZ could potentially be scaled back, which would then leave room in the market for VA to restart domestic ops.

There were also suggestions that Tiger would take on some trans-tasman routes. Once VA's MAXs start arriving over the next year or so, they will start transferring the older 737s to TT. TT may start some trans-tasman routes, and maybe even domestic New Zealand routes. We'll see cooperation between VA and TT like QF and JQ, at least for New Zealand. Otherwise I could potentially see another partner also stepping in. SQ already cover MEL-WLG. EY have aircraft that sit in MEL and SYD long enough for a trans Tasman flight. Maybe DL would even do one from LAX in the opposite direction via AKL.

It's not true that VA hasn't deepened relations with its stable partners. Just last year VA solidified its status credit earning on DL to match it's own flights.

The AC and HX deals will finally come through. It's crazy they've taken this long already.

Re future direction, I believe the future for VA is China. This is more speculators, but I believe there's evidence of a Virgin kangaroo route tie up. HX are looking for a partnership to support their LHR route, most likely VS to take on CX/BA. VS already co-operate somewhat with VA, so I can see a more comprehensive VA/HX/HU/VS agreement happening. VA will carry Australian passengers into HKG and PEK, where HU and HX then carry them onto Europe and Asia under a dual hub strategy. HKG for the primary Euro destinations that HU currently can't get into, and PEK for the second tier Euro destinations like Belgrade.

An increased cooperation with VS could see VA potentially pulled into the VS/AF/KL/DL strategic alliance. This would provide European coverage for VA, and potentially (remember this part is more speculative) eventuate in VA and VS being pulled into Skyteam.

If not, I believe VA will continue to do what VA does, forming partnerships. While they are losing a few atm, remember they did partner with 6 new airlines last year. VA just needs more strategic coverage

Last edited by JBL at Jun 03, 2018, 03.01 PM.
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By John Phelan | Jun 03, 2018, 07:33 PM
The smartest thing (financially) for VA would be to pull out of international flying on its own metal entirely, with the possible exception of LAX. It loses money on international and simply doesn't have enough aircraft. Joining an alliance would help, but John Borghetti remains totally against that. But the current mish-mash of international alliances is a mess, and expecting your customers to play "lounge lotto" (where the lounge used varies depending upon route, class and FF status) is ridiculous.
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By DanV | Jun 03, 2018, 08:22 PM
HX would also be against that, as HX are currently not allowed to fly to the main AU cities with their own metal due to the full bilaterals under the HK-AU agreement. Hence why their parent bought a stake in VA to access the AU market with VA's A330s.

In other words keeping LAX and HKG would be the "extreme" case.
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By Rohit | Jun 03, 2018, 08:44 PM
Whatever they do, Virgin needs to immediately replace its CEO. He has run his race, time to bring fresh blood.
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By Mitchd31 | Jun 04, 2018, 03:07 PM
Va will not pull out of the Tasman if anything provincal routes such as Dunedin and BNE-WLG will be flown by Tiger,VA has one up on NZ as the later does not offer J/C ex WLG,CHC,ZQN so all Va need to do is make soft product changes.
As for LH Va have the worlds best business as voted last 2 years and in a statement by the ceo expansion with VA own metal wont be further west then SIN or east past LAX which does leave a lot of options in terms of Japan,China even a link from MEL to HNL as currently nobody flies it.
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By whoppersandwich | Jun 04, 2018, 03:39 PM
JQ currently flies MEL-HNL, and let’s not forget that VA don’t have any plans to expand their LH fleet anytime soon...
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By Jazzop | Jun 04, 2018, 04:40 PM
I wonder, if VA threatened to pull of trans-tasman, would it force a review by the AU and NZ Government competition bodies?

I'd say a SkyTeam application has to be pending....
Last edited by Jazzop at Jun 04, 2018, 04.42 PM.
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Neil R

By jpk77 | Jun 04, 2018, 04:54 PM
Whatever they do, Virgin needs to immediately replace its CEO. He has run his race, time to bring fresh blood.

I was a big JB fan when he first executed the GameChanger strategy at VA, but he hasn't kicked too many goals since then. Luxon (AirNZ CEO) saw right through him, and if JB had stepped aside when asked Virgin would likely be in a stronger position now. Instead AirNZ decided to cut all ties and go on the offensive, at the same time Hogan (EY CEO) was moved on due to their crazy spending so they're not able to help anymore, and VA has to try and find friends in China...
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Comyns Ian

By jcr737 | Jun 04, 2018, 05:48 PM
Whatever they do, Virgin needs to immediately replace its CEO. He has run his race, time to bring fresh blood.
Totally agree. Leaderless, no direction, no time for alliances, no idea of what to do next. Keep flights to LAX, give HKG 12 months, give TT New Zealand. If HKG is a winner, then concentrate on further mainland China ports if available. Forget Singapore as mentioned above, SQ does it to death from ALL of Australia, VA simply cannot match them. Pull back, concentrate on Oz domestic, play for time on international, get the right aircraft & destination combo & finally get a CEO with new ideas & the experience to lead VA back to a prominent position.

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By Polbathic | Jun 04, 2018, 06:09 PM
They probably need to be more strategic with fewer alliances that work better for both the airline and frequent flyers alike. Concentrate on SQ, DL and HN whilst continuing alliances where helpful for intermediate destinations such as HA. For NZ (the country) fly direct from some of the smaller ports to an Australian hub and distribute from there. Eg Hamilton-Syd would give northern Kiwis access to the Australian domestic market and international connections with just as few hops as Hamilton-AKL-(Syd) (although Sydney would benefit from a domestic/International VA terminal). There are other ports that might work this way as well, plus you could potentially use fully kitted 737s to do add ons to other links (like in the old days). 
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